Computer storage giants Toshiba Corp. and Western Digital Corp. said have finally ended their long-running dispute over the sale of the former company’s flash memory business.

Toshiba has been trying to sell its Toshiba Memory Corp. business unit, which is the second-largest supply of NAND flash memory chips in the world, to a consortium led by Bain Capital LP for $18 billion. The Japanese firm needs to sell its memory business to cover the billions of dollars in liabilities it faces due to the bankruptcy of its U.S. based nuclear power business Westinghouse.

Western Digital had been opposed to the sale to Bain, and threatened to block any moves in that direction through legal action, citing joint venture agreements between the two companies that it says gave it first bidding rights. Western Digital wanted to buy Toshiba’s memory business itself for a reduced fee due to the booming demand for NAND flash, which is a critical storage component for most next-generation technologies.

However, Western Digital has finally backed down, reaching an out-of-court settlement with Toshiba that will allow the sale to Bain Capital to go ahead. “WD’s complaint was a bit of a ‘hail-Mary’ pass to begin with, so I’m not surprised at all” with the deal, said Patrick Moorhead, president and principal analyst at Moor Insights & Strategy.

As part of the deal, Western Digital will instead be allowed to partner with Toshiba on a new production line that will manufacture advanced memory chips. The two companies said Tuesday they’ve reached “a global settlement agreement to resolve their ongoing disputes in litigation and arbitration, strengthen and extend their relationship, and enhance the mutual commitment to their ongoing flash memory collaboration.”

The compromise means that Toshiba Memory Corp.’s sale to the Bain Capital consortium will go ahead as planned. Western Digital is clearly a loser here because it was strongly opposed to that sale. The consortium also includes two of its biggest rivals, U.S. firm Seagate Technology Plc. and South Korean company SK Hynix Inc., which will now obtain some of WD’s production assets via the joint venture agreements.

In return, Western Digital at least gets to stay in the flash memory business. The U.S.-based company gets to invest in and be a part of the Toshiba’s new flash chip manufacturing facility, which is under construction in Yokkaichi, Japan. In addition, it will be allowed to invest in a second planned facility in Iwate, Japan.

Meanwhile, Western Digital and Toshiba say they’re extending the terms of their existing joint ventures. These include the Flash Alliance, which is extended to Dec. 31, 2029, and Flash Forward, which extends to the same date.

Perhaps most importantly, the two companies also said they’ve agree on “mutual protections” for any assets and information connected to the sale of Toshiba’s memory business, and say they will collaborate to ensure its success following an eventual initial public offering.

That last aspect of the deal seemingly confirms what was really at stake here – namely, that Western Digital was worried about the possible influence its competitors Seagate and SK Hynix might have had on its joint venture agreements with Toshiba. It isn’t clear exactly what measures have been put in place to protect Western Digital’s assets, though the company seems satisfied with whatever was agreed.

“We wanted to make sure that our interests in the JV were sufficiently protected and we had the right kind of protections and the right kind of access,” said Western Digital Chief Executive Steve Milligan.

Image: Toshiba/Facebook